Fixed rate popularity falls
The percentage taking out fixed deals fell to 92%, compared to September 2013’s average of 94%.
The popularity of fixes also fell amongst remortgagers, with 89% opting for a fix compared to 92% in September last year.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “The question of interest rate rises is not an ‘if’ but a ‘when’.
“That being said, the Bank of England has made repeated assurances that interest rate rises will be gradual, and this seems to have filtered through to some consumers, who are willing to opt for variable mortgages to take advantage of lower pricing.
“Once interest rate rises become a reality, we may well see consumer preference swing back to longer-term fixed rate products which guarantee a set rate.”
The cost of 2-year trackers stood at 2.63% in September according to Moneyfacts, the lowest recorded rate since the index began in June 2007.
In contrast, 2-year fixes reached their highest average (3.78%) in sixteen months, while 5-year fixes stood at 4.16%.
Mortgage activity made a turnaround in September, with total mortgage applications increasing by 13% monthly after dropping by 18% in August as part of a seasonal slowdown.
This has been driven by remortgage applications, which increased by 20% month-on-month compared to 10% for purchase applications.
On an annual level remortgages also increased by 35% compared to 23% for purchases.
Murphy added: “Buyers who are unsure on their product choices should consider speaking to an independent mortgage broker, who can assess their situation and provide guidance on the best option for them from across the market.
“Now is an ideal time for existing homeowners to check whether their current mortgage is still the best deal: acting fast before interest rates rise could prove beneficial in the long-term.
“It is likely we will see the recent boost in remortgage application numbers reflected in lending figures over the coming months as lenders respond to growing demand.”